Yahoo CEO, Marissa Mayer,recently made news when she banned all Work-from -Home (WFH) for all Yahoo employees. Part of the reason why this was news-worthy is that Yahoo had been aggressive in extending WFH and flexible hours to employees. In the early years of the commercialization of the Internet—during the late 90s–Yahoo was one of the pillars of the Internet community. Its success helped fuel the irrational exuberance that inflated the Internet Bubble. In those days, Yahoo was an innovator, a leader, and a cool place to work; and it was growing rapidly. It was a place you could go to find other places on the Internet—a kind of directory of websites. Yahoo ‘s revenue model was unique to the technology industry,but it was basically the same as network television’s—sponsors paying for advertisements. Yahoo unfortunately got caught up in the marketing “wisdom” of the day, which said, “Just like with Nielsen ratings in TV, the more eyes you have on the screen, the more you can charge advertisers. So, instead of concentrating on building a fast,efficient search of the Internet’s content, Yahoo tried to be a destination itself–a place where users would visit and spend lots of time looking at and clicking on ads. The Internet marketing gurus called it making your site “sticky.” Greatly underestimating the intelligence of the users, Yahoo thought people needed a “portal” to the Internet, a starting point, an on-ramp to the Information Highway. So they built a site that streamed information at the users,who were actually ready for a gateway that would take them quickly to where they wanted to go. So, instead of being Google, Yahoo ended up being a sticky-portal-thing for people who needed their Internet spoonfed to them. Yahoo missed the search engine market, just as it would miss the social media market; but it was successful right up through 2000, when the Bubble burst.

Arrogance and Hubris

The history of the computer industry is filled with examples of companies that enjoyed rapid growth spurts, which were followed by periods of correction. Even that old grey battleship, IBM, had to re-trench in the 80s after a phenomenal ramp up during the 50s and 60s (when Ross Perot was an IBM salesman, which he said was “Like selling umbrellas on a rainy day.”) When technology companies are in the rocketing revenue-growth phase, they tend to develop arrogance and hubris.. “Hey …We must be smart—Look at how well we’re doing.’ Also, all of the management attention is on keeping up with the revenue growth—feeding fuel into the engine—not necessarily building infrastructure and processes to efficiently manage the company over the long run. During the early years of Yahoo’s growth, various policies and programs were put in place to fuel the growth, to attract technical talent. Arrogance and hubris made it feel invincible, and luxuries were built into the culture. Arrogance and hubris. That was when they were riding high, one of the most successful Internet companies.

Top-down Dictates Can’t Overcome Weak Management

During that same time, they implemented one of the most liberal WFH programs possible, which gave them an advantage in recruiting. In fact, many people were recuited to work there just because of the promise of being able to work from home. So they had a very rich entitlement policy, but nobody managed it—they were all too busy enjoying the company’ success and growth rate. Then, hard times hit and the correction cycle came around. The management team didn’t know how to reign in the bloated structure, or transition the culture to one focused on cost-effectiveness and productivity. People started abusing the liberal policies, and the managers couldn’t control the employees’ behavior. According to reports, Mayer decided to change the WFH policy when she grew frustrated seeing empty employee parking lots. Banning all WFH is an admission that the company can’t manage the policy.

When the company and its employees lose the advantages of innovative programs due to blanket top-down dictates because a small percentage of employees and managers can’t manage their behavior, the larger percentage of employees—and overall productivity–suffer.

Note: Another company that once did very well, but now has fallen on tough times—Best Buy— recently announced a similar ban on all flexible hours, closing a program that had been viewed as an industry leader. Chances are, managers needed help, rather than the cessation and banning of the policies.